The University of Michigan will freeze hiring, and employees’ base salaries will not increase through the end of the 2020-21 budget year, as it works to preserve financial resources in the face of reduced revenue and unpredicted expenses related to the COVID-19 pandemic.
President Mark Schlissel told faculty and staff in an April 20 email message that the university — including all three campuses and Michigan Medicine — estimates anticipated losses of $400 million to $1 billion through the end of the 2020 calendar year.
The hiring and pay freezes were among several measures he outlined along with voluntary programs for furloughs and reduced hours, postponement of construction projects, and the suspension of all non-essential expenditures.
Schlissel also announced he and the chancellors of UM-Dearborn and UM-Flint will reduce their monthly salaries by 10 percent through the end of the year. The university’s remaining executive officers, chief diversity officer and athletic director will reduce their salaries by 5 percent. The cuts are voluntary and are in addition to the freeze in base salaries noted for employees.
Ann Arbor campus deans not covered by the executive officer cuts have volunteered to donate funds that will provide support for student and staff emergency needs.
The financial uncertainties from the pandemic “continue to impose a set of very real challenges on the university,” Schlissel said. “We also know that the future will not return to what we knew as ‘normal,’ at least not immediately and perhaps for much longer.”
“The University of Michigan is an institution that has stood the test of time for more than 200 years,” he added. “While it will not be easy, U-M will overcome this pandemic and we will — as we always have — uphold our public mission and the promise we have made to those we serve.”
The president identified four “clear principles that will guide difficult decisions in the months to come.” Developed in conjunction with the executive team and key senior leaders to align with U-M’s core values, they are:
- Deliver the mission of U-M.
- Value, protect and support the university’s students and employees.
- Preserve the university’s long-term excellence.
- Communicate effectively and thoughtfully with the U-M community.
Regarding the final point, Schlissel said, “I want you to know that I pledge to be as proactive as possible with sharing information about any changes that affect us going forward.”
He acknowledged that additional measures may be necessary in the months ahead “to address growing consequences of the pandemic.”
“For instance, work that is available now under the current conditions may not be available in future months. We also must keep in mind the operational and resource needs when we are able to ramp back up. This will depend on state orders and federal guidelines, and it’s important to note that it won’t be like flipping a switch,” Schlissel said.
“We’re already working to plan for a more gradual return to normal activity, informed by strong public health guidance. I remain cautiously optimistic that we will be able to deliver a public health-informed fall semester on our three campuses.”
Details of the cost-saving measures include:
Elimination of non-essential expenditures
All non-essential expenditures — for example travel, conferences, use of consultants — are to be suspended and new financial commitments are to be avoided until further notice. Research projects that are fully funded by federal sponsors can continue operations and spending as needed.
All hiring, including temporary staff, is frozen with the possible exception of staff or faculty in roles considered critical, and those fully funded by federal grants. Units may still hire student employees as appropriate. The university will honor its outstanding offers extended to staff or faculty. Michigan Medicine will continue to apply its own criteria based on patient-care needs.
Effective immediately, base salaries will not increase through the end of the upcoming budget year. This includes merit increases with exception of those related to faculty and staff promotions that have already been approved, are part of the faculty tenure and promotion process, or are contractual adjustments prescribed by collective bargaining agreements.
Voluntary staff furloughs and reduced hours
With unit approval, regular staff in non-critical operations may temporarily take an unpaid furlough during the COVID-19 pandemic, or temporarily reduce their work hours. In both cases, employees would be able to return to their regular positions and hours at the end of the approved period, which can range from 60 to 120 days.
Employees approved for furloughs would be eligible to file for unemployment compensation. Units will continue to pay the university premium portion of insured benefit plans, and the employee contribution for health plan coverage will be waived during a furlough. Benefits for employees approved for reduced hours would depend on the resulting percentage of effort.
Contractors have paused construction on campus, and the university will re-evaluate its financial ability in deciding when to resume projects already in construction and how long to delay projects that are proposed for design.
“The actions I’ve mentioned are the result of two primary factors: All of the university’s major sources of revenue are in question, and we have incurred large, sudden, and unexpected costs due to the pandemic,” Schlissel said.
Expenses include the pandemic response at U-M’s hospitals and clinics, coupled with lost revenue from non-urgent medical procedures and outpatient clinics. U-M also has issued refunds for employee parking and rebates for student housing and dining. Additionally, the need for student financial aid is likely to increase.
On the revenue side, Schlissel said U-M faces uncertainties around demand for classes, its ability to safely bring students to campus, the nationwide economic slowdown, potentially greater needs for patient care, and the possibility that state support and federal research funding may decrease significantly.
Some have suggested the university draw down its endowment to help offset the shortfall. Schlissel said the endowment, like other investments, has suffered “large but uncertain losses,” and that it already is “an essential resource for funding student scholarships on our three campuses, supporting critical medical research and other costs that ensure success of programs across the university.”
He reiterated that much of the endowment supports funds that are designated through agreements with donors for specific purposes.
“We are committed to honoring these agreements with our donors and to maintaining the endowment’s ability to support scholarships, important programs and the long-term stability of the university,” he said.